Financial moves to make now to help secure financial stability in the future
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We are in the third quarter of 2025, and there have been plenty of financial events that have impacted impacted Americans’ pocketbooks. Arguably the biggest change is President Trump’s sweeping international tariffs imposed on exports to the U.S. The tariffs range from 10 to 50%, and target partners such as China and the European Union. The announcement tanked the markets, specifically impacting many Americans’ 401k’s. The Department of Government Efficiency has also made several job cuts in an effort to reduce government spending. With so much economic uncertainty ahead, there are steps Americans can take to navigate their personal finances as the year continues.
One of the epicenters of Americans’ financial struggles over the past few years has been inflation. Debt accumulation, inability to build a savings, and a shift in spending habits are just some of the issues that have been exascerbated by inflation. In fact, a recent report from WalletHub found 1 in 4 people believe they will have more credit card debt by the end of 2025. Meanwhile, 46% of Americans don’t have a plan to pay off their debt. Rising consumer debt is going to play a crucial role in shaping financial priorities by increasing focus on debt management, altering spending habits toward essentials, reducing savings capabilities and potentially fostering long-term behavioral shifts toward more conservative financial practices.
Higher living costs have also impacted Americans’ ability to save. According to the Federal Reserve, personal savings rates have fallen making it difficult to make substantial down payments that are required for home purchases in most cases, or to afford new vehicles without relying heavily on credit. While consumer spending has increased, more than 4% compared to one year ago, this rise in expenditure often comes from credit card usage rather than available cash reserves.
Record credit card debt levels, higher living costs, and inflation have also taken a toll on Americans’ ability to save. A report from Plinqit found a majority of Americans save less than 20% of their monthly household income. Meanwhile, a Bankrate report found less than half of Americans say they’d be able to cover an unexpected $1,000 emergency expense. That’s the lowest percentage since 2021.
A lack of savings can force Americans to take more extreme measures such as taking on debt they cannot afford, or dipping into retirement savings. A report from Vanguard found a record number of account holders took a hardship withdrawal last year. In 2024, 4.8% of account holders made a hardship withdrawal, up from 3.6% in 2023. Before the pandemic, only about 2% of account holders accessed their retirement funds. This suggests many people are facing unanticipated financial disruptions including eviction, medical emergencies, or sudden job loss that are forcing people to draw from their retirement accounts prematurely. What many people don’t realize is that the loss of compounding interest on withdrawn amounts can significantly diminish future nest eggs. Therefore, it’s crucial that Americans seek alternative solutions before resorting to tapping into retirement savings.
For consumers working to balance debt repayment, savings and spending effectively in our current economic climate, the following steps should be taken.
- Assess your financial situation. Determine your total monthly income after taxes and list all of your monthly expenses. You can break these expenses into fixed and variable categories. Mortgages, rent and utilities are examples of fixed expenses, while groceries, entertainment, and other discretionary spending would count as variable expenses.
- Evaluate debt obligations. Next, list all of your debts including credit card balances, student loans, auto loans, and mortgages. Note the interest rates and minimum payments for each.
- Build a budget. Once you have an understanding of your situation, create a realistic budget that allocates funds for essential expenses, debt repayment, savings, and discretionary spending. It’s key to prioritize your needs over your wants so be sure that all essential needs are covered before allocating funds to discretionary spending. Your budget should also include designating a portion of your income toward paying off high-interest debts first, or attacking smaller debts to build momentum. And finally, don’t forget to include savings in your budget. Aim to save at least 10% of your income, if possible.
- Manage debt wisely. Whenever possible, pay more than the minimum monthly payments on credit cards or loans to reduce interest costs over time. You may also want to consider consolidation options if you have multiple high-interest debts. Consolidating your debt could give you a lower interest rate, or more management payment plans.
- Create an emergency fund. Having emergency savings can help you avoid taking on additional debt when unexpected costs arise. Aim to save at least three to six months worth of expenses saved at all times.
The past few years have been tough for Americans–especially when it comes to their finances. Taking the time to evaluate your income versus your expenses, prioritizing needs over wants, creating a budget, making a plan to attack existing debt, and building an emergency savings, can make a huge difference when it comes to financial stability in the future. Consider meeting with a financial advisor who can assess your situation and provide specific strategies to help you achieve your financial goals.